SaaS

Editor’s note:Sharad Sharma and M.R. Rangaswami are co-hosts of the NASSCOM Product Conclave 2012 (November 7-8, 2012), the ninth annual event for India’s software startups. Sharma and Rangaswami discuss the trends in this dynamic region and the impact of SaaS in India’s businesses.

A revolution is taking place in India’s businesses, which is transforming India at large. It began with mobile phones. Although there were telephones in India prior to mobile phones, they never took off in a big way. But mobile phones are so inexpensive and provide such great benefits that now everybody has a phone. The software-as-a-service model is a similar phenomenon in that SaaS fills a void that could not be filled in any other way. SaaS is an inexpensive way for India’s businesses to have good-quality software that makes their businesses much more efficient and effective.

SaaS will be even more of a game-changer in India than it has been in the United States. It’s not just because of the pricing model; it’s also because the time is right. SaaS products are proliferating at the same time as ubiquitous mobile devices and the flood of Big Data are causing companies to look for new business solutions. As businesses embrace SaaS for their critical business functions, they get more velocity in their business, which makes them more competitive in their markets.

Local products — made by local Indian software companies that understand the local business needs — are a key factor in the growing use of SaaS solutions. Improvement of Internet services in India has also contributed to SaaS adoption. A third factor is the fear that not using SaaS solutions will cause a company to be an outlier. This was not the case a couple of years ago. So it’s a tipping point-phenomenon coupled with more availability of local products at a very attractive price point.

A major transition is underway in the technology stack. In the life cycle of the software industry, new solutions typically come from startups and small companies as opposed to large companies. We see this happening again today in India where the small, nimble startups are shifting their business to create SaaS solutions. Even so, some startups are dramatically more successful than others, due in large part to two enablers.

Two enablers driving competitive advantages among software companies

Most of the product startups in India are led by first-time entrepreneurs, so they have no unlearning to do. Over the past year it is evident that two factors have enabled some startups to be more successful in not only getting their product to market as quickly as possible but also in embracing marketing concepts around customer discovery, identifying the right market, and knowing how to effectively price the product.

A striking example of the difference made by identifying the right market and pricing model is the story of an Indian software startup that was selling an HR solution for small businesses. The company had raised $8 million in venture money to build its SaaS solution. Their price point was roughly about $8 per employee per month. Then the 2008-2009 economic crisis hit, and this new company wasn’t selling enough to survive. They decided to wind down the company.

The entrepreneur leading the startup came up with a scheme to help retire some of the debt and thus shut the company down graceful. He decided to give away the software product to the company’s pipeline customers at $8 per year instead of $8 per month.

Now, two years later, the company is growing rapidly and has taken off like a rocket ship. Today the price point for its product is at 50 cents per employee per month ($6.00 per year). Their customers include multinational companies, and the startup is remaining profitable. So what has happened? They had a good product but had not discovered the right market and right price point before they took the product to market. It turns out that at $6 a year there is a very large market for this particular SaaS product.

Two of the factors enabling startups to be more effective are accelerator programs and the annual NASSCOM Product Conclave.

In a sense, one could say that 2012 has been the year of accelerators in India because of the number of local accelerators that have gotten underway and made a big impact. There are some U.S. accelerator programs in India, but the local ones have mushroomed over the past few months. They are built on many of the same principles as the U.S. accelerators. All are based on the idea of the Lean Startup methodology that came out of Steve Blank.

NASSCOM’s Product Conclave, now in its ninth year, is designed not only to inform, train and educate the startup executives but also to bring angel investors and venture investors to the mix so that the startups can talk to people who can fund them.

Silicon Valley in India

India gained the expertise in providing IT services and software as an offshoring model for solutions for Fortune 500 companies over the past 15-20 years. So they have a knowledge base of what the Fortune companies need. The difference now is that they are utilizing this knowledge to actually produce products that they can sell and to which they can continually add value.

But switching from services to products requires a mindset change among India’s entrepreneurs. Part of the reason for the annual conclave is to take a delegation of seasoned executives from Silicon Valley that have been successful in creating software companies in the United States as well as scaling them, identifying markets, and marketing and selling products. They share their experience, insights and best practices with the India startup community.

The free-flowing information at the conclave, coupled with information on the web, enables Indian companies to get much more connected with the software ecosystem. Notably, it is changing the entrepreneurs from inexperienced to savvy in a much shorter time line than was possible even two years ago. Entrepreneurs are getting up to speed much faster on how to deal better with investors, how to sell better, and what mistakes to avoid.

This year’s conclave features six tracks (up from three tracks two years ago) with richer content aimed at practitioners — product entrepreneurs who are already building out their companies rather than “wannabes” watching from the sidelines and wondering when to get into the market.

The conclave this month also will focus on deep networking among groups of conclave participants. Each group will have a software industry maven and group members will network with each other through 2013 all the way into next year’s conclave. The goal is for each group to become a discussion forum that helps members get a better handle on issues they face.

Synergies, a key benefit of any ecosystem, are also reflected within the NASSCOM Product Conclave. Not only will experts from Silicon Valley share their experiences, but they will hopefully return to the Valley with case studies and learnings out of India.

The world is becoming smaller, with a tighter, more symbiotic relationship between Silicon Valley and India’s product community, and everyone benefiting from the value of a shared pool of learnings.

Sharad Sharma is the Chair of NASSCOM Product Forum and is an active member of Indian Angel Network. Most recently he was a SVP at Yahoo! and CEO of India R&D. He is passionate about cloud computing and its potential to create software product winners out of India.

M.R. Rangaswami is CEO and co-founder of Sand Hill Group and publisher of SandHill.com.